One of the significant risks for typical angel investors is that follow-on capital could have aggressive terms that damage the upside potential for the earlier investors. However, this risk to VIN investors is mitigated through several important factors:
- By co-investing in the same class of stock with larger investors such as VIC, investors reduce the risk of having to accept future rounds on poor terms. The larger investors can help protect the interests of all investors in the given class of stock.
- One or more dedicated board seats are provided for the class of stock in which the VIN members are investing. This ensures appropriate representation for all decisions that might affect value of VIN member shares.
- First right of refusal is offered on new rounds to protect ownership stake. This allows VIN members to maintain their ownership percentage in future financings of the company.
- Broad based anti-dilution is typically included adjust the number of shares in case of future investment rounds at a lower share price.
